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The Week Observed: December 11, 2015

By Daniel Hertz

11.12.2015

What City Observatory did this week

1. A $1.6 billion proposal. A film school teacher in San Francisco had some people talking about “ethical landlording” as a solution to the problem of too-high real estate prices. But substituting the private whims of land owners for prices as a way to determine who wins access to scarce housing isn’t necessarily an improvement. We have a different idea: tax capital gains on housing. In 2013 alone, SF area residential property increased in value by $159 billion. A tax that collected just one percent of that value could create a public funding stream for a significant amount of affordable housing.

2. Pulling a FAST one. Congress has finally agreed on a five-year transportation bill—but it’s hardly cause for celebration. With the so-called “FAST Act,” the federal government has officially severed the connection between the gas tax and funding for the Highway Trust Fund, acknowledging what has long been true: drivers don’t pay for the cost of using public roads. But rather than using that acknowledgement to expose drivers to more of the costs of their driving, the FAST Act commits a kind of bank robbery, raiding the Federal Reserve’s cash, an irresponsible one-time budget stopgap that leaves the question of long-term financing still unresolved.

3. Climate concerns steamrolled by FAST Act and cheap gas. Even as the UN hosts major climate change talks in Paris, our national transportation policy is pushing us in the wrong direction. With gas prices lower than they’ve been in years, it should be a good time for a small increase in the gas tax and other measures that make drivers internalize some of the costs they impose on society by driving—like greenhouse gas emissions. But the new FAST Act takes no such actions. In the meanwhile, cheap gas is already leading Americans to buy less fuel efficient cars, which will remain on the road for a generation, releasing 140 metric tons more carbon than if gas prices hadn’t fallen.

4. Cities have reason to be wary of Fed moves. After years of keeping interest rates low to stimulate the economy, the Federal Reserve is planning to raise them substantially over the coming years. While Fed rate changes may seem distant to the issues of urban neighborhoods, city leaders and residents should be concerned. For one, low interest rates have encouraged the construction of multifamily buildings that have added people and vitality to many inner-city neighborhoods. But more broadly, if the Fed’s rate hike slows the broader national economy, that slowdown will be felt on the ground in the economic health of cities and neighborhoods across the country.

The week’s must reads

1. It can be very challenging to explain to most people why they would benefit from less parking in their neighborhood, or where they go shopping—after all, most people only think about it when they’re frustrated that they can’t find a spot. But now, you can just direct them to this minute-long video from the City of Ottawa. As part of its campaign to reduce its parking requirements, the City made a video to help its citizens understand why they should want that—and it’s one of the best quick explanations for non-planners that we’ve seen.

2. So you want transit-oriented development in your community, but you don’t have any rail lines. Good news! It probably doesn’t matter. Via Streetsblog California, Daniel Chatman of the University of California, Berkeley writes that it’s not proximity to rail transit that seems to have the biggest impact on reducing residents’ driving. Instead, reducing parking requirements, providing high-quality bus transit, and creating shopping and service destinations within walking distance of housing seem to be the most important factors. As Chatman points out, that’s a good thing: rail transit is scarce and expensive to build, but it turns out you don’t need it to get many of the benefits associated with it.

3. Angie Schmitt writes up a new report arguing that suburban office parks are in trouble. The real estate firm Newmark, Grubb, Knight and Frank looked at markets in five major US cities and found that a key issue is that offices in more traditional urban areas have access to a larger number of amenities, which more isolated suburban offices need to pay to replicate inside their own campuses. They estimate that 14 to 22 percent of suburban office space is obsolete. Proximity to transit is also important: offices more than a quarter-mile away from a new light rail line in Denver had vacancy rates nine percent higher than those within a quarter mile.

New knowledge

1. Racial segregation continues its slow decline in American metropolitan areas, even as it remains at very high levels. William Frey at the Brookings Institution has parsed 2010-14 American Community Survey data to update our understanding of residential racial separation. Notably, some of the most segregated regions in the country saw the largest declines: in Chicago, for example, the average black resident’s surrounding neighborhood was 72.2 percent black in 2000, but 64.4 percent black in the 2010-14 ACS data. Overall, 45 of 52 metropolitan areas registered decreases.

2. In Los Angeles County, a full 14 percent of all land is used for automobile parking. In much of the county, there are more than 11,000 parking spaces per square mile. In many cases, those spaces were built as a result of legal requirements to provide off-street parking—a mandate for more sprawling development, and an implicit subsidy to drivers, who receive “free” parking whose cost is hidden in the higher cost of real estate or goods and services. A team of researchers have investigated how parking requirements have dramatically added to LA’s parking supply since 1950, with excellent graphics. Surprisingly few cities have a comprehensive inventory of parking supply, making this a model of the kind of information that would enable better-informed discussions of parking policy.

3. From Norway, new research adds to the evidence of social benefits from taxing housing. In addition to generating revenue (that could be used, as we propose above, for directly creating affordable housing), taxes on residential real estate can moderate demand for housing by removing its preferential tax status as a financial investment. That, in turn, can lower prices. This study suggests that taxing housing like any other capital asset would (in Norway) reduce housing prices by as much as 18 percent. While the exact numbers would obviously be different in the US—and certainly vary from place to place within the US—the basic dynamics are the same.

The Week Observed is City Observatory’s weekly newsletter. Every Friday, we give you a quick review of the most important articles, blog posts, and scholarly research on American cities.

Our goal is to help you keep up with—and participate in—the ongoing debate about how to create prosperous, equitable, and livable cities, without having to wade through the hundreds of thousands of words produced on the subject every week by yourself.

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